What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-08 · 71 added, 67 removed, 387 unchanged (26% of the section changed)

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GIP received net proceeds from the offering of approximately $391.3 million.

The Company did not receive any proceeds from the offering transaction.

The offering transaction was conducted pursuant to a registration rights agreement among us and the Sponsors.

On September 20, 2024, GIP sold an aggregate of 12,650,000 of our Class A shares, inclusive of the underwriter’s option to purchase up to 1,650,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the underwriter of $35.12 per Class A Share.

GIP received net proceeds from the offering of approximately $444.3 million.

The Company did not receive any proceeds from the offering transactions.

The offering transactions were conducted pursuant to a registration rights agreement among us and the Sponsors.

On March 14, 2024, the Partnership purchased directly from the Sponsors 2,816,901 Class B units representing limited partner interests in the Partnership (“Class B Units”) for an aggregate purchase price of approximately $100 million.

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The purchase price per Class B Unit was $36.71, the closing price of the Class A Shares on June 24, 2024.

On September 11, 2024, the Partnership, purchased directly from the Sponsors 2,823,262 Class B Units for an aggregate purchase price of approximately $100.0 million.

The purchase price per Class B Unit was $35.42, the closing price of the Class A Shares on September 9, 2024.

The repurchase transactions were funded using borrowings under the Partnership’s existing revolving credit facility and cash on hand.

As a result of the equity offerings and unit repurchase transactions described above, our public ownership increased from approximately 29.8% at December 31, 2023, to approximately 41.0% at June 30, 2024, on a consolidated basis.

We utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate increase in our quarterly distribution level per Class A Share in each of the first two quarters of 2024, which, on an annualized basis, is significantly above our target of at least 5% growth in annual distributions per Class A Share through 2026.

We utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate increase in our quarterly distribution level per Class A Share in each of the first three quarters of 2024, which, on an annualized basis, is significantly above our target of at least 5% growth in annual distributions per Class A Share through 2026.

Our assets and operations are organized into the following three reportable segments:

(1) gathering (2) processing and storage and (3) terminaling and export.

Second Quarter Results

Significant financial and operating highlights for the second quarter of 2024 included:

PART I – FINANCIAL INFORMATION (CONT’D)

Third Quarter Results

Significant financial and operating highlights for the third quarter of 2024 included:

• Consolidated net income of $164.7 million;

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• Net cash provided by operating activities of $224.9 million;

PART I – FINANCIAL INFORMATION (CONT’D)

• Adjusted EBITDA of $286.9 million;

• Cash distribution of $0.6677 per Class A Share declared on July 29, 2024, an increase of $0.0161 per Class A Share for the second quarter of 2024 as compared with the first quarter of 2024.

Revenues and other income in the second quarter of 2024 were $365.5 million compared with $324.0 million in the prior‑year quarter.

Second quarter 2024 revenues and other income were up $41.5 million compared with the prior-year quarter primarily due to higher physical volumes.

The second quarter 2024 results also included a one-time $8.0 million reduction in revenues related to setting the 2024 tariff rates for certain subsystems.

Total operating costs and expenses in the second quarter of 2024 were $143.2 million, compared with $125.9 million in the prior-year quarter.

The increase was primarily attributable to higher maintenance expenses, pass-through expenses and higher depreciation expense for additional assets placed in service.

Interest expense in the second quarter of 2024 was $49.7 million, up from $43.8 million in the prior-year quarter, primarily attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued in May 2024, higher interest rates on our credit facilities and higher borrowings on our revolving credit facility.

• Cash distribution of $0.6846 per Class A Share declared on October 28, 2024, an increase of $0.0169 per Class A Share for the third quarter of 2024 as compared with the second quarter of 2024.

Revenues and other income in the third quarter of 2024 were $378.5 million compared with $363.1 million in the prior‑year quarter.

Third quarter 2024 revenues and other income were up $15.4 million compared with the prior-year quarter primarily due to higher physical volumes.

Total operating costs and expenses in the third quarter of 2024 were $146.8 million, compared with $143.1 million in the prior-year quarter, primarily attributable to higher depreciation expense for additional assets placed in service.

Interest expense, net of interest income, in the third quarter of 2024 was $51.8 million, up from $45.8 million in the prior-year quarter, primarily attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued in May 2024, partially offset by lower interest on lower borrowings under our revolving credit facility.

Income tax expense increased $7.5 million resulting from ownership changes following secondary equity offering and Class B Unit repurchase transactions.

As a result, consolidated net income increased $12.4 million and Adjusted EBITDA increased $29.7 million for the second quarter of 2024 compared with the second quarter of 2023.

Throughput volumes increased 19% for gas gathering and 17% for gas processing in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production and higher gas capture.

Throughput volumes increased 23% for crude oil gathering and 17% for terminaling in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production.

As a result, consolidated net income decreased $0.1 million and Adjusted EBITDA increased $17.2 million for the third quarter of 2024 compared with the third quarter of 2023.

Throughput volumes increased 9% for gas gathering, crude oil gathering and gas processing in the third quarter of 2024 compared with the third quarter of 2023, primarily due to higher production and higher gas capture.

Throughput volumes decreased 5% for terminaling in the third quarter of 2024 compared with the third quarter of 2023, primarily due to lower third-party volumes.

Water gathering volumes increased 29%, reflecting higher crude oil production and increased utilization of our water gathering infrastructure.

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Results of Operations

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Results of operations for the three months ended June 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).

For the Three Months Ended June 30, 2024

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Results of operations for the three months ended September 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).

For the Three Months Ended September 30, 2024

Processing and Storage

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PART I – FINANCIAL INFORMATION (CONT’D)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Processing and Storage

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(2) Thousand barrels per day

Revenues and other income increased $21.0 million in the second quarter of 2024 compared to the second quarter of 2023, of which $17.2 million is attributable to higher gas gathering volumes that were above MVCs in the second quarter of 2024 and 2023, $6.1 million is attributable to higher water gathering and disposal revenue, $5.0 million is attributable to higher crude oil gathering volumes that were above MVCs in the second quarter of 2024 and above MVC levels of the second quarter of 2023, and $3.4 million is attributable to higher pass‑through revenue.

Additionally, $1.4 million of the increase is attributable to services provided directly to third parties.

These revenue increases were partially offset by $12.1 million attributable to lower tariff rates, including a $3.6 million one-time reduction related to setting the 2024 tariff rates for certain subsystems.

Operating and maintenance expenses increased $7.0 million, of which $3.4 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $2.3 million is attributable to compressor stations overhauls and other maintenance activities, and $1.3 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Revenues and other income increased $6.0 million in the third quarter of 2024 compared to the third quarter of 2023, of which $7.8 million is attributable to higher gas gathering volumes that were above MVCs in the third quarter of 2024 and 2023, $4.8 million is attributable to higher water gathering and disposal revenue, $1.6 million is attributable to services provided directly to third parties, $0.3 million is attributable to higher pass‑through revenue, and $0.2 million is attributable to higher crude oil gathering volumes that were above MVCs in the third quarter of 2024 and 2023.

These revenue increases were partially offset by $8.7 million attributable to lower tariff rates.

Operating and maintenance expenses decreased $1.2 million, of which $3.5 million is attributable to lower costs related to the produced water release remediation reserve, partially offset by $1.9 million attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements and $0.4 million attributable to all other costs.

Depreciation expense increased $3.3 million due to new compressors and other new gathering assets brought into service.

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Processing and Storage

Revenues and other income increased $16.7 million in the second quarter of 2024 compared to the second quarter of 2023, of which $15.1 million is attributable to higher gas processing volumes that were above MVCs in the second quarter of 2024 and 2023, $3.4 million is attributable to higher tariff rates and $3.1 million is attributable to services provided directly to third parties.

These revenue increases were partially offset by a $4.4 million one-time reduction related to setting the 2024 tariff rate and $0.5 million lower pass-through revenue.

Operating and maintenance expenses increased $3.5 million, of which $3.0 million is attributable to higher third-party processing fees and $1.0 million is attributable to higher maintenance activity, slightly offset by $0.5 million attributable to lower pass-through costs.

Income from equity investments increased $2.0 million in the second quarter of 2024 compared to the second quarter of 2023 primarily due to higher volumes processed at the LM4 plant.

Revenues and other income increased $11.9 million in the third quarter of 2024 compared to the third quarter of 2023, of which $5.5 million is attributable to higher gas processing volumes that were above MVCs in the third quarter of 2024 and 2023, $3.7 million is attributable to higher tariff rates and $3.3 million is attributable to services provided directly to third parties.

These revenue increases were partially offset by $0.6 million attributable to lower pass-through revenue.

Operating and maintenance expenses increased $3.6 million, of which $2.4 million is attributable to higher third-party processing fees and $1.5 million is attributable to higher maintenance activity, slightly offset by $0.3 million attributable to lower other costs.

Income from equity investments increased $1.7 million in the third quarter of 2024 compared to the third quarter of 2023 primarily due to higher volumes processed at the LM4 plant.

Terminaling and Export

Revenues and other income increased $3.8 million in the second quarter of 2024 compared to the second quarter of 2023, of which $3.5 million is attributable to higher crude oil terminaling volumes that were above MVCs in the second quarter of 2024 and above MVC levels of the second quarter of 2023, $1.6 million is attributable to pass-through revenue, and $0.4 million is attributable to other income.

These revenue increases were partially offset by $1.7 million attributable to lower tariff rates.

Operating and maintenance expenses increased $3.9 million in the second quarter of 2024 compared to the second quarter of 2023, of which $2.3 million is primarily attributable to the rail car recertification program and $1.6 million is attributable to rail transportation pass-through costs.

Revenues and other income decreased $2.5 million in the third quarter of 2024 compared to the third quarter of 2023, of which $2.0 million is attributable to lower tariff rates and $0.9 million is attributable to lower crude oil terminaling volumes that were above MVCs in the third quarter of 2024 and 2023.

These revenue decreases were partially offset by $0.4 million attributable to other income and services provided directly to third parties.

Operating and maintenance expenses decreased $2.8 million in the third quarter of 2024 compared to the third quarter of 2023, primarily attributable to the rail car recertification program.

Interest and Other

Interest expense, net of interest income, increased $5.9 million in the second quarter of 2024 compared to the second quarter of 2023, of which $4.9 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024 and $1.8 million is attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility, partially offset by $0.8 million interest income.

Interest expense, net of interest income, increased $6.0 million in the third quarter of 2024 compared to the third quarter of 2023, of which $9.8 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024, partially offset by $3.2 million attributable to lower interest on lower borrowings under our revolving credit facility and $0.6 million higher interest income.

Income tax expense increased $7.5 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.

PART I – FINANCIAL INFORMATION (CONT’D)

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Results of operations for the six months ended June 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).

For the Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Results of operations for the nine months ended September 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).

For the Nine Months Ended September 30, 2024

Processing and Storage

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PART I – FINANCIAL INFORMATION (CONT’D)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Processing and Storage

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(2) Thousand barrels per day

Revenues and other income increased $44.4 million in the first six months of 2024 compared to the first six months of 2023, of which $31.6 million is attributable to higher gas gathering volumes that were above MVCs in the first six months of 2024 and 2023, $12.2 million is attributable to higher water gathering and disposal revenue, $7.4 million is attributable to higher crude oil gathering volumes that were above MVCs in the first six months of 2024 and above MVC levels of the first six months of 2023, and another $7.4 million is attributable to higher pass‑through revenue.

Revenues and other income increased $50.4 million in the first nine months of 2024 compared to the first nine months of 2023, of which $39.3 million is attributable to higher gas gathering volumes that were above MVCs in the first nine months of 2024 and 2023, $17.0 million is attributable to higher water gathering and disposal revenue, $7.7 million is attributable to higher pass‑through revenue, and $7.6 million is attributable to higher crude oil gathering volumes that were above MVCs in the first nine months of 2024 and above MVC levels of the first nine months of 2023.

Additionally, $4.2 million of the increase is attributable to services provided directly to third parties.

These revenue increases were partially offset by $25.4 million primarily attributable to lower crude oil tariff rates.

Operating and maintenance expenses increased $14.9 million in the first six months of 2024 compared to the first six months of 2023, of which $7.4 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $5.2 million is attributable to compressor stations overhauls and other maintenance activities, and $2.3 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Operating and maintenance expenses increased $13.7 million in the first nine months of 2024 compared to the first nine months of 2023, of which $7.7 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $5.1 million is attributable to compressor stations overhauls and other maintenance activities, and $4.2 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

These increases were partially offset by $3.3 million attributable to lower costs related to the produced water release remediation reserve.

Depreciation expense increased $8.6 million due to new compressors and other new gathering assets brought into service.

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Processing and Storage

Revenues and other income increased $41.4 million in the first six months of 2024 compared to the first six months of 2023, of which $29.4 million is attributable to higher gas processing volumes that were above MVCs in the first six months of 2024 and 2023, $6.4 million is attributable to higher tariff rates, and $6.2 million is attributable to services provided directly to third parties, slightly offset by $0.6 million lower pass-through revenue.

Operating and maintenance expenses increased $8.5 million in the first six months of 2024 compared to the first six months of 2023, of which $4.8 million is attributable to higher third-party processing fees and $3.7 million is attributable to higher maintenance activity.

Income from equity investments increased $3.1 million in the first six months of 2024 compared to the first six months of 2023 primarily due to higher volumes processed at the LM4 plant.

Revenues and other income increased $53.3 million in the first nine months of 2024 compared to the first nine months of 2023, of which $34.5 million is attributable to higher gas processing volumes that were above MVCs in the first nine months of 2024 and 2023, $10.5 million is attributable to higher tariff rates, and $9.5 million is attributable to services provided directly to third parties, slightly offset by $1.2 million lower pass-through revenue.

Operating and maintenance expenses increased $12.1 million in the first nine months of 2024 compared to the first nine months of 2023, of which $7.2 million is attributable to higher third-party processing fees, $5.4 million is attributable to higher maintenance activity, and $0.7 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements, slightly offset by $1.2 million lower pass-through costs.

Income from equity investments increased $4.8 million in the first nine months of 2024 compared to the first nine months of 2023 primarily due to higher volumes processed at the LM4 plant.

Terminaling and Export

Revenues and other income increased $6.3 million in the first six months of 2024 compared to the first six months of 2023, of which $5.7 million is attributable to higher crude oil terminaling volumes that were above MVCs in the first six months of 2024 and above MVC levels of the first six months of 2023, $3.4 million is attributable to pass-through revenue, and $0.7 million is attributable to other income and services provided directly to third parties.

Revenues and other income increased $3.8 million in the first nine months of 2024 compared to the first nine months of 2023, of which $4.7 million is attributable to higher crude oil terminaling volumes that were above MVCs in the first nine months of 2024 and above MVC levels of the first nine months of 2023, $3.4 million is attributable to pass-through revenue, and $1.1 million is attributable to other income and services provided directly to third parties.

These revenue increases were partially offset by $5.4 million attributable to lower tariff rates.

Operating and maintenance expenses increased $6.6 million in the first six months of 2024 compared to the first six months of 2023, of which $3.4 million is attributable to rail transportation pass-through costs and $3.2 million is primarily attributable to the rail car recertification program.

Operating and maintenance expenses increased $3.8 million in the first nine months of 2024 compared to the first nine months of 2023, of which $3.4 million is attributable to rail transportation pass-through costs and $0.4 million is attributable to all other costs.

Interest and Other

Interest expense, net of interest income, increased $12.8 million in the first six months of 2024 compared to the first six months of 2023, of which $8.7 million is attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility and $4.9 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024, partially offset by $0.8 million interest income.

Interest expense, net of interest income, increased $18.8 million in the first nine months of 2024 compared to the first nine months of 2023, of which $15.3 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024 and $4.7 million is attributable to higher interest on our credit facilities due to higher interest rates, partially offset by lower borrowings under our revolving credit facility.

These increases were further offset by $1.2 million higher interest income.

Income tax expense increased $23.2 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.

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The following table presents a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions)

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Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders.

On July 29, 2024, we declared a quarterly cash distribution of $0.6677 per Class A Share, to be paid on August 14, 2024 to shareholders of record on August 8, 2024.

On October 28, 2024, we declared a quarterly cash distribution of $0.6846 per Class A Share, to be paid on November 14, 2024 to shareholders of record on November 7, 2024.

Simultaneously, the Partnership will make a distribution of $0.6846 per Class B Unit of the Partnership to the Sponsors.

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The Partnership used the proceeds to reduce indebtedness outstanding under the Partnership’s revolving credit facility, with the remaining net proceeds for general corporate purposes.

As of June 30, 2024, the Partnership had:

As of September 30, 2024, the Partnership had:

• $400.0 million aggregate principal amount of 5.500% fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

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or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00.

As of June 30, 2024, we were in compliance with all debt covenants under the indentures.

As of September 30, 2024, we were in compliance with all debt covenants under the indentures.

In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries.

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Credit Facilities

As of June 30, 2024, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility.

As of September 30, 2024, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility.

The Credit Facilities mature in July 2027.

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If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time.

As of June 30, 2024, there were no borrowings outstanding under the Partnership’s revolving credit facility, and borrowings of $392.5 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

As of September 30, 2024, borrowings of $30.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $390.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes.

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The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter.

As of June 30, 2024, we were in compliance with these financial covenants.

As of September 30, 2024, we were in compliance with these financial covenants.

Operating Activities.

Net cash provided by operating activities increased $53.6 million for the six months ended June 30, 2024, compared to the same period in 2023.

The change in operating cash flows resulted primarily from an increase in revenues and other income of $92.1 million, an increase in distributions received from equity investments of $3.0 million, a decrease in cash used by changes in working capital of $0.4 million, partially offset by an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $41.9 million.

Net cash provided by operating activities increased $63.0 million for the nine months ended September 30, 2024, compared to the same period in 2023.

The change in operating cash flows resulted primarily from an increase in revenues and other income of $107.5 million, an increase in distributions received from equity investments of $4.0 million, partially offset by an increase in expenses, other than depreciation and other non-cash gains and losses of $47.0 million, and an increase in cash used by changes in working capital of $1.5 million.

Investing Activities.

Net cash used in investing activities increased $11.4 million for the six months ended June 30, 2024, compared to the same period in 2023 driven by higher payments for additions to property, plant, and equipment primarily related to our compression capacity and related infrastructure expansion program.

Net cash used in investing activities increased $51.0 million for the nine months ended September 30, 2024, compared to the same period in 2023 driven by higher payments for additions to property, plant, and equipment primarily related to our compression capacity and related pipeline infrastructure expansion program.

Financing Activities.

Net cash used in financing activities decreased $52.1 million for the six months ended June 30, 2024, compared to the same period in 2023.

In the first six months of 2024, we received proceeds of $591.1 million, net of financing costs, from our issuance of $600.0 million aggregate principal amount of 6.500% fixed-rate senior unsecured notes, that we used to reduce indebtedness outstanding under our revolving credit facility and for general corporate purposes.

In the first six months of 2024, we repaid $345.0 million of net borrowings under our Credit Facilities compared to $180.0 million net proceeds from borrowings under our Credit Facilities during the same period in 2023.

In addition, in the first six months of 2024, we paid higher distributions to shareholders and noncontrolling interests of $14.3 million, partially offset by lower transaction costs of $0.3 million.

Net cash used in financing activities increased $7.3 million for the nine months ended September 30, 2024, compared to the same period in 2023.

In the first nine months of 2024, we received proceeds of $590.5 million, net of financing costs, from our issuance of $600.0 million aggregate principal amount of 6.500% fixed-rate senior unsecured notes, that we used to reduce indebtedness outstanding under our revolving credit facility and for general corporate purposes.

In the first nine months of 2024, we repaid $317.5 million of net borrowings under our Credit Facilities compared to $258.0 million net proceeds from borrowings under our Credit Facilities during the same period in 2023.

In addition, in the first nine months of 2024, we paid higher distributions to shareholders and noncontrolling interests of $21.7 million and paid higher transaction costs of $0.6 million as compared to the same period in 2023.

Capital Expenditures

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The following table sets forth a summary of capital expenditures and reconciles capital expenditures on an accrual basis to additions to property, plant and equipment on a cash basis:

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

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Additions to property, plant and equipment

Capital expenditures in 2024 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities and related infrastructure to meet Hess’ and third parties’ current and future production growth and gas capture targets.

Capital expenditures in 2024 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities and related pipeline infrastructure to meet Hess’ and third parties’ current and future production growth and gas capture targets.

The activities focus on the construction of two new compressor stations and associated pipeline infrastructure, which are expected to be placed in service in 2025.

Capital expenditures in 2023 were also attributable to continued expansion of our compression capacity and related infrastructure.

Capital expenditures in 2023 were also attributable to continued expansion of our compression capacity and related pipeline infrastructure.

PART I – FINANCIAL INFORMATION (CONT’D)

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o risks that such ongoing arbitration is not satisfactorily resolved and the potential transaction fails to be consummated;

o Chevron’s ability to integrate Hess’ operations in a successful manner and in the expected time period;

o Chevron’s ability to integrate Hess’ operations in a successful manner and in the expected time period following consummation of the Merger;

o the possibility that any of the anticipated benefits and projected synergies of the potential transaction will not be realized or will not be realized within the expected time period;

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o the effect of the announcement, pendency or completion of the potential transaction on the parties’ business relationships and business generally, and the risks that the potential transaction disrupts current plans and operations of Chevron or Hess and potential difficulties in Hess employee retention as a result of the transaction, as well as the risk of disruption of Chevron’s or Hess’ management and business disruption during the pendency of, or following, the potential transaction;

o the receipt of required Chevron board of directors’ authorizations to implement capital allocation strategies, including future dividend payments, and uncertainties as to whether the potential transaction will be consummated on the anticipated timing or at all, or if consummated, will achieve its anticipated economic benefits, including as a result of risks associated with third-party contracts containing material consent, anti-assignment, transfer, other provisions that may be related to the potential transaction which are not waived or otherwise satisfactorily resolved or changes in commodity prices;

o the receipt of required Chevron board of directors’ authorizations to implement capital allocation strategies, including future dividend payments;

o uncertainties as to whether the potential transaction will be consummated on the anticipated timing or at all, or if consummated, will achieve its anticipated economic benefits, including as a result of risks associated with third-party contracts containing material consent, anti-assignment, transfer, other provisions that may be related to the potential transaction which are not waived or otherwise satisfactorily resolved or changes in commodity prices;

o negative effects of the announcement of the transaction, and the pendency or completion of the proposed acquisition on the market price of Chevron’s or Hess’ common stock and/or operating results;

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Interest rate swaps may be used to convert interest payments on certain long‑term debt.

At June 30, 2024, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At June 30, 2024, our total debt had a carrying value of $3,460.3 million and a fair value of approximately $3,397.8 million, based on Level 2 inputs in the fair value measurement hierarchy.

At September 30, 2024, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At September 30, 2024, our total debt had a carrying value of $3,489.8 million and a fair value of approximately $3,497.3 million, based on Level 2 inputs in the fair value measurement hierarchy.

A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $86.2 million or $80.9 million, respectively.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis